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San Diego Biotech Firms Continue to Expand Footprints

Fate Therapeutics Among Latest of Smaller Players Growing Real Estate Presence
June 5, 2018
Biopharmaceutical firm Fate Therapeutics plans a significant expansion of its headquarters space at this Torrey Pines office building.

Fate Therapeutics Inc. is significantly boosting its headquarters footprint in Torrey Pines, a deal which is emblematic of continued expansion by small and mid-sized life science and biopharmaceutical companies in San Diego, which ranks among the nation’s largest biotechnology hubs.

According to its June 1 filing with the Securities and Exchange Commission, Fate Therapeutics has entered into an agreement to expand its leased presence at 3535 General Atomics Ct., which is owned by Alexandria Real Estate Equities Inc. The biotech firm plans to grow its current space there by 50 percent, at a cost of more than $12 million over 10 years, based on numbers in the filing.

Brian Starck, an executive director in the San Diego office of Cushman & Wakefield, which represents Alexandria, said brokers are working on the expansion but that the deal had not been finalized as of June 4. According to Fate Therapeutics’ 8-K filing with the SEC, its amended lease would expand its headquarters presence at that location by 24,197 square feet, taking it from 47,924 to 72,121 square feet.

The tenant, which has been in the building since 2010, is also extending the lease termination from its current date of June 30, 2023. The new deal adds 10 years after it begins occupying the expansion space, currently expected to occur by Jan. 1, 2019. Monthly base rent for the expansion space would be $4.35 per square foot, increasing annually by 3 percent. Fate Therapeutics has a tenant improvement allowance of up to $1.85 million, according to the filing.

Fate Therapeutics, whose shares trade on the Nasdaq exchange, is a clinical-stage biopharmaceutical company focused on cellular-level treatments for cancer and immune disorders. Officials said the Torrey Pines expansion would include office, laboratory and manufacturing facilities.

  Related News: Biotech Real Estate Maintains Momentum in San DiegoFEBRUARY 14, 2018  |  LOU HIRSH

The company’s expansion fits with multiple real estate trends in the local biotech industry.

For instance, JLL recently reported that San Diego’s life-sciences leasing activity in the first quarter was led by small and mid-sized companies, with space needs of less than 35,000 square feet. Leases at that size and smaller accounted for 95 percent of the total completed leases during the first quarter, and the total of 19 biotech leases signed during the quarter was up 12 percent from a year ago.

“Large user activity, particularly among big-pharma companies, has been notably absent in San Diego,” said the report from JLL researchers and brokers Chad Urie and Grant Schoneman. Those bigger multi-national players, by contrast, are much more active in the biotech hubs of San Francisco and Boston.

JLL noted the largest biotech lease completed locally during the first quarter was by Tocagen Inc. at University Town Center, for 38,849 square feet, followed by Inception Sciences’ 22,000-square-foot lease at Sorrento Mesa. Most others were considerably smaller, including deals by Pipeline Therapeutics (9,143) and BlueStar Genomics (7,007) at Torrey Pines, and the lease by Alaya Bioscience at Sorrento Valley (5,271 square feet).

But activity among the small and medium-sized firms still adds up to significant space absorption. San Diego’s overall biotech space direct-availability rate at the end of the first quarter was 5.8 percent – down 190 basis points from a year ago – and the rate in Torrey Pines was even lower, at 4 percent.

Those smaller, locally-based companies are projected to drive further space expansion in coming months. JLL noted that Tocagen, which filed for an initial public offering of stock in April 2017, is now in the process of tripling its real estate footprint. Also, startup company Gossamer Bio earlier this year secured a $100 million round of financing and has since moved into a new 32,039-square-foot facility in Torrey Pines.

Lou Hirsh, San Diego Market Reporter  CoStar Group   

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